Pork producer Hormel Foods has agreed to pay $11 million to settle a class action
lawsuit alleging price-fixing in the pork industry. The lawsuit, originally filed in 2018,
claims Hormel Foods and eight other pork producers shared sensitive information with
each other to monitor the aggregate pork supply and reduce production and increase
prices. The $11 million will be split between different constituencies that claimed to be
harmed by the scheme, with $2.4 million to be paid to restaurants and delis, $4.8 million
to wholesale distributors, and $4.4 million to consumers.
The Hormel settlement is just the latest among the co-defendants. To date, companies
named in the lawsuit, including well-known brands like Tyson and Smithfield Farms,
have paid over $200 million in settlements. None of the producers have admitted
wrongdoing. Pork prices have also risen significantly since the lawsuit was first filed. So,
despite the allegations, it appears the pork producers will continue to bring home the
bacon.
Discussion Questions:
1) According to the USDA, the four largest meatpacking companies in the US
control 67 percent of the market in 2019. How does this concentration affect the
prices consumers pay, and the price meatpackers pay for hogs?
2) Explain why price-fixing arrangements are difficult to maintain without legal
government approval.
Sources| Indexmund: https://www.indexmundi.com/commodities/?commodity=pork&months=120; Startribune: https://www.startribune.com/lawsuit-alleges-hormel-other-companies-illegally-inflated-pork-prices/486861091/; https://m.startribune.com/hormel-settles-pork-price-fixing-suits-for-11-million/600358116/utm_campaign=star_tribune&utm_medium=social&utm_source=twitterx&clmob=y&c=n&s=03; Unsplash: Photo by Wright Brand Bacon on Unsplash